It’s been bad month after bad month for the fund industry, as sales numbers keep falling, but July saw one of the poorest performances ever for the industry.
According to new statistics released by the Investment Funds Institute of Canada, total industry assets were $685.4 billion at the end of July, down from $700.1 billion last month and $703.5 billion this time last year.
Total industry sales fell dramatically from $1.63 billion in June to $646 million last month. Last year at this time industry sales hit almost $3 billion.
“It was really one of the worst months for sales of long-term funds since IFIC has been keeping track,” says Rudy Luukko, investment funds editor at Morningstar Canada.
Luukko says people are still frightened by the credit crunch and other economic woes, so they’re hesitant to put their dollars in long-term funds.
Cash is moving into money market funds, however. The sector saw its sales grow 2.2% from June to $71.6 billion. Money market assets have climbed 30.5% to $16.73 billion since the beginning of the year, and 45.6%, or $22.42 billion, since July 2007.
Money market fund sales increased from $1.2 billion in June to $1.36 billion at the end of last month, while in the last year money markets have brought in $20.2 billion. “This was over seven times the year-to-date tally at July 2007, or $2 billion, and over four times the tally for the 12 months ending July 2007 ($4.66 billion),” IFIC writes in its report.
Luukko adds that “this was the only thing that rescued the industry from being in a net redemptions month overall,” but cautions that sales of money market funds won’t necessarily translate into sales of long-term funds. “That money could well be deployed potentially to other types of investments or other areas such as real estate.”
One long-term area that fared better than most was Canadian Balanced funds, which took in about $500 million of new money. Luukko explains that this sector fared well because the asset class is less volatile. “But even here there was a significant theme of playing it cautious,” he says. “Well over half of the balanced funds’ sales went into the Canadian Neutral Balanced category, which is one of the more conservative areas.”
The worst-performing sector was the Global & International Equity funds, which saw $589.1 million in net redemptions.
All this proves is that Canadian investors are playing it safe, not only avoiding equities, but fixed-income as well. “People are shunning fixed-income funds, which, because of the generally low yields, are not seen as a very attractive alternative either,” says Luukko.
He does admit that July is usually a slow month for fund sales, so lower inflows are not unexpected, but the results are still “extremely disappointing.”
Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com
(08/15/08)